Jackson Jambalaya

Progress versus the past.   It is an age-old conflict that will always be with us.  In this case, it describes the war that has broken out between Gabriel Prado and the power companies of Mississippi as they brawl at the Mississippi Public Service Commission.  At stake is the future of data centers in Mississippi and who gets to provide power to them.  

This tale of corporate conflict began on March 2 when Prado AI Industrial, LLC filed a request for a declaratory opinion with the Mississippi Public Service Commission.  The request stated Prado AI plans to build an advanced industrial campus an AI data center in Ridgeland.  A 350 megawatt natural gas-fired electric generation facility will provide power for the campus and there in lies the core of the controversy.  

Prado AI asked the Commission to determine whether the company can produce its own electricity solely to serve its needs without regulation by the Commission.  The generation facility will not interconnect with the existing electrical grid.  

Prado AI stated it will not sell or meter any electricity to the public.  The company plans to lease the data center to tenants.    Thus electricity will be available to those who sign a lease and pay rent, similar to a rental agreement in an apartment complex.  

The request argues Section 77-3-3(d) of the Mississippi Code is the relevant statute as it defines a public utility as a person or company that generates and/or sells natural gas to the public.  Section (d)(iv) states: 

(iv) The term "public utility" shall not include any person not otherwise a public utility, who provides or furnishes the services or commodity described in this paragraph only to himself, his employees or tenants as an incident of such employee service or tenancy, if such services are not sold or resold to such tenants or employees on a metered or consumption basis other than the sub-metering authorized under Section 77-3-97.

Prado AI justified the request:  

Prado AI has a direct interest in confirming that private self-generation by an entity for its own internal use does not constitute furnishing electricity to the public and that construction, ownership, and operation of the Power Generation Facility will not subject Prado AI to regulation as a public utility or otherwise require Commission approval. Lack of certainty impacts Prado Al's ability to timely secure financing for the Project and meet the timelines required to secure top-tier tenants for the Data Center Facilities and Semiconductor Facilities

The self-generation of electricity is described as a "rational response." Data centers consume a great deal of electricity. Fearing higher prices and the limiting of supply of electricity, states and cities are starting to ban data centers unless they provide their own power. Data centers are facing growing opposition in Mississippi even though government leaders strongly support them as worthy economic development projects. Indeed, Prado AI claims the inability of electrical grids to supply the vast amounts of power required for data centers are causing delays in their construction.   

  The request for the opinion, Prado AI posits, is strongly supported by Governor Tate Reeves' project, the Mississippi Power Play.  The initiative aims to cut red tape, stimulate investment, and make Mississippi a model state for energy policy and investment.  

The power companies of Mississippi are used to being the 800 lb gorillas in the room and this case is no exception.  No sooner had  Prado AI submitted its request when a plethora of public utilities started trying to intervene in the case ten days later.  

Mississippi Power Company filed a motion to intervene on March 12 with the Commission.  The company argued approval of the Prado AI request could substantially affect public utilities throughout Mississippi.  The interpretation of a "narrow statutory provision" could upset the "delicate regulatory balance" and usher in an era of widespread deregulation.  

 Entergy Mississippi filed a similar motion on March 16.  The utility claimed it had a strong interest in the proceedings since its certificated area included the site of Prado AI's project.  Cooperative Energy* and Delta Mississippi Gas Company sought intervention as well. 

The Commission granted the motions to intervene on March 19 and ordered all parties to submit briefs by April 13.  

Mississippi Power vigorously argued Prado AI's proposal makes it a public utility, thus violating the rights of existing utilities.  It claims Prado AI will indeed provide electricity to the public in violation of the Public Utility Act.  How did Mississippi Power reach such a conclusion? Why it claimed the tenants are the public. Establishing a landlord-tenant relationship is said to be forming a direct connection to the public even if there is only one tenant.  Hence Prado AI will break the law if its plans come to fruition. 

The brief claims since Prado AI will own the equipment and facility used for the generation of electricity for the public, it will be transmitting and distributing electricity to the public.  Mississippi Power accuses Prado AI of glossing over the details while claiming the project is protected by the statute's landlord-tenant exception.  At best, the power company posited, the exception only allows Prado AI to furnish electricity to tenants, not generate and transmit electricity to them.   

Mississippi Power was not done in trying to throw up roadblocks before what is arguably the march of progress in Mississippi.  Although Prado AI says it will not meter or sell power, it does not say how the tenants will pay the landlord for the power they use.  There is simply no way it can be compared to a rental fee similar to an apartment lease.  Thus Prado AI must obtain a certificate to build a power generation facility.  

The brief cites a 2019 North Carolina case in support.  The facts of the case are almost identical to this one as a company wanted to build its own power generation facility for a project using the same landlord-tenant exception.  However, the North Carolina Utilities Commission ruled for the power companies and killed the project.  

Mississippi Power also took issue with Prado AI's use of Rule 24.  The rule allows the PSC to issue declaratory opinions.  Rule 24 is a fast-track of sorts as no discovery is allowed, a feature that rankled the utility.  It submitted data requests to Prado AI but the company refused to provide any information, arguing it was not required to do so and much of the information requested was propietary. 

Entergy Mississippi pointed out in its brief the Commission can decline to issue a declaratory opinion for good cause and urged it to do so. Repeating Mississippi Power's arguments, Entergy said Prado AI's proposal likely makes it a public utility because it will be providing electricity to the public as the tenants are the public.  

The utility behemoth attacked Prado's interpretation of the statute, claiming it is limited to those furnishing or providing electricity, not those generating and distributing electricity.  Entergy raised the issue of backup power as well, charging Prado AI would have to connect to Entergy's electrical grid for back-up power which in turn means Prado AI would have to go through the entire approval process for a public utility.  

The interconnection to Entergy's grid for a back-up power supply could drive up costs for consumers as well as reducing the amount of electricity available for their consumption.  If Prado AI is a public utility, it can't violate Entergy Mississippi's "exclusive right" to provide power to its certificated area, including a site in Ridgeland.   

Entergy points to a 2024 amendment to the Mississippi Public Utilities Act, which expanded the definition of serving "the public" to explicitly include providing service to "an individual person or an entity or a collection of persons or entities". EML argues this amendment neutralizes Prado AI's claim that serving a select group of private tenants exempts it from public utility status.

Prado AI fired back with its own brief.  The brief dismissed Mississippi Power, claiming building the power-generation facility will not hasten a new era of widespread deregulation.  The company only seeks to provide power to its tenants and no one else.  Prado AI reiterated the system will not connect to the grid.   

The brief charged several large industries in Mississippi use co-generation plants to meet their energy needs.  It is a long-accepted fact, Prado Ai argues, a facility can generate its own energy if it consumes it and does not sell it to consumers.  The International Paper Mill (120+ MW) in Columbus and Georgia Pacific Mill (80+ MW) in Monticello are cited as examples.  Last but not least is the SpaceX's xAI project in Desoto County.  Boasting a production of 1.2 gigawatts, it will use 41 natural gas turbines.  MDEQ approved the project although it did not require Commission approval.  Needless to say, the xAI power-generation facilities are much larger than the one proposed by Prado AI.  

The times are indeed a'changing as noted by the petitioner.  38% of data centers in the United States will use a mix of onsite power generation by 2039 while 27% will depend exclusively on their own power generation.  President Trump strongly encouraged major tech companies to sign the Ratepayer Protection Pledge.  Thus Prado AI argues approving its request comports with the President's stated goal of getting data centers to build their own power generation facilities instead of using the grid.  

More gamesmanship took place after the submission of the briefs.  Prado filed a motion to strike Entergy's brief.  Pointing out the briefs were due by 5 PM on April 13, Prado AI stated Entergy files its brief at  7:16 PM.  The Commission logged it as filed on April 14 since it was submitted after the close of the business day.  Thus the Commission, it is argued, should disregard the brief.  Entergy replied Prado AI filed its brief at 4:57 PM.  Accepting the brief will not prejudice either party.  

Jackson developer Gabriel Prado owns Prado AI, LLC. The company was formed on January 13.  

The Public Service Commission announced it will render a decision by June 1.    

Kingfish note: This is a really interesting case.  Entergy and its allies are pushing for their old system, a regime that has been in place since the 1950's.  Prado AI is arguing such laws do not reflect the modern world and the fast-paced evolution of artificial intelligence.  Notice Entergy does not argue it can provide the power needed for the project.  It just wants to ban the project period.  It will probably take years for Entergy to add that much production to its grid.  To be fair, the power companies argue the project and others like it will raise rates for the rest of us as these large corporate customers create their own mini-grids.  

 As stated earlier, it will be interesting to see how the Public Service Commission rules.